Pasty tax: U-turn 'a shambles' says Labour

 

Treasury minister David Gauke: "We have still delivered a budget that is good for the public finances"

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Labour has condemned the way the government has dealt with planned VAT rises on Cornish pasties and static caravans as a "total shambles", following a reversal of the plans.

The U-turns from Chancellor George Osborne's Budget follow protests by bakers and caravanning enthusiasts.

The government said it showed it was listening, but Labour said the VAT rises had been "ill thought-out".

A 5% rate of VAT on static caravans will be delayed until April next year.

And the government has altered the definition of what is a "hot" pasty to allow the reversal of its plans.

Currently, VAT is not charged on most food and drink, or hot baked goods, but is payable on takeaway food sold to be eaten hot.

'Ill-thought through'

Shares in bakery firm Greggs rose 8% on the news but Labour's shadow chief secretary to the Treasury, Rachel Reeves, described the policy reversal as "a total and utter shambles".

She said: "These partial U-turns, just a few weeks after ministers were defending the pasty tax and caravan tax, show just how ill-thought through the Budget was and how out of touch David Cameron and George Osborne are."

Ms Reeves accused ministers of trying to avoid a Commons defeat on Labour's upcoming motion - especially after their support dropped over Parliament's last vote on the caravan tax.

After the amendment, food such as sausage rolls or pasties sold on shelves - that is, cooling down, rather than being kept hot in a special cabinet - will not be liable for VAT.

The definition of a "hot" pasty is being altered to allow the reversal, while a 20% charge due to be levied on static caravans will now drop to 5%.

The government said it had improved the policies after engaging with concerns.

It estimates the U-turns will cost £70m in total lost revenue in the financial year 2014/15.

'Addressing concerns'

During a parliamentary debate last week, MPs from all three main parties criticised Mr Osborne's proposals, arguing they were unenforceable and would have an adverse impact on jobs and businesses.

This is the price our politicians pay in order to try and persuade the Tory press to become Tory once again

However, hot savouries, including pasties and pies are exempt. The U-turn would effectively maintain this situation where they are left to return to "ambient temperatures" on shelves in bakeries and supermarkets.

Bakery firm Greggs, which was leading a campaign against the proposals, said it welcomed the government's change of heart.

"This is fantastic news for the customer more than anything," said the firm's chief executive Ken McMeikan.

"If we had to put up prices by 20% in the current marketplace when consumers are having a very difficult time we expected there would be an impact on sales but we don't know what it would have been. I think the government deserves to be applauded."

'Simple regime'

Static caravans do not currently incur VAT and The National Caravan Council had warned that levying VAT at 20% would threaten 7,000 manufacturing jobs and cost the tourism industry more than £100m in reduced business.

Several Conservative MPs rebelled when the issue was voted on in April, reducing the government's majority to 21, and Labour had been planning to force another vote on the issue when Parliament returns from its current recess.

Caravan Owners of static caravans will have to pay just 5% VAT, rather than 20%

Graham Stuart, Conservative MP for Beverley and Holderness, said the climbdown was "a victory for the campaign to persuade the government to think again".

Treasury Minister David Gauke said the government has listened to "representations" from the industries affected while still addressing some anomalies in the VAT system.

On the issue of VAT on takeaway food, he said "we have a simpler system than we previously had and we have improved the position".

The changes of policy are the latest in a series of rethinks on measures announced in March's Budget.

Ministers recently announced a £30m compensation package for churches to offset a proposed increase on VAT on alterations to listed buildings to 20%.

There have also been calls for a planned cap on tax relief on donations - of £50,000 or 25% of income a year - to be scrapped amid concerns it will hit philanthropy.

 

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  • rate this
    +1

    Comment number 694.

    650 le bloke - concentrate not on what labour did or did'nt do then;look around at what is happening now,labour are not in power,a happless and Useless coalition is,there's no sanity or pride in having to suffer them,whats Prescott got to do with any of this anyway?

  • Comment number 693.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +6

    Comment number 692.

    The government walks the fine line beyond which lies tyranny - at every turn they try to turn the screw a little tighter to limit your freedoms and part you from your cash. When people cause enough fuss, they back off.... just a little, wait for it to settle, then carry on.

  • Comment number 691.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +1

    Comment number 690.

    @675
    so they have taken their lead from the last government then. They are all the same regardless of which ilk they are!

  • rate this
    +10

    Comment number 689.

    All this fuss over something stirred up to be deliberatley controversial. We owe £billions to the rest of the world and the British are worried about pasties. No wonder we are in such a mess.

  • rate this
    -11

    Comment number 688.

    655 - Andy c555

    Sorry . But I had to give you a negative rating .

    Because seeing all ed balls little helpers vote you down , made me realise your message is more likely to appear on the lowest rated page . And be easily accesable to all .

    Judging by the voting me balls has got seven comrades at work right now
    You speak the truth my friend .

  • rate this
    -5

    Comment number 687.

    There was nothing wrong in principle with creating an even playing field for retailers of hot food and the VAT on pasties and similar hot produce was reasonable. The power of the press to mould public opinion is evident in the Governments U turn, and clearly demonstrates just how susceptible we are to spin. Editors must be rubbing there hands with glee and looking for the bandwagon.

  • Comment number 686.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +1

    Comment number 685.

    Perfect fodder for The Sun and Daily Mail readers who will be salivating over this 'victory' like lambs to the slaughter.

  • rate this
    +4

    Comment number 684.

    A shambles when there's a pasty tax, a shambles when there's a u-turn on a pasty tax. Labour - stop sniping from the sidelines and actually come up with something yourselves.

    And stop saying 'out of touch' in every sentence even when it's not really applicable. Learn some new vocabulary. Out of touch is also a Labour front bench who have hardly had a real job between them.

  • rate this
    +2

    Comment number 683.

    Labour would never have introduced a "Pasty Tax". It would have decimated John Prescott's bank account.

  • rate this
    +2

    Comment number 682.

    This story sums up this governments "right to govern"

    Inept is the best word I could offer, but hey this is what the "people" voted for.

    As you sow, so shall you reap.

  • rate this
    +5

    Comment number 681.

    What else is the government passing through today in terms of laws? Let's face it, governments distract us with something irrelevant so that we won't see what they are really up to... And you always trust a bunch of politicians... I think not...

  • rate this
    +1

    Comment number 680.

    Ref 612.ukblahblahblacksheep
    46 Minutes ago

    Also, if u want to use a Tax to actively discourage certain behaviour then it needs to be proportional to peoples ability to pay it.

    I agree - it is like a tax to drive on a particularly busy road - it only frees it up for those able to pay the tax.

    This adminstration = tax anything - as long as it does not affect me.

  • rate this
    +2

    Comment number 679.

    The government really shouldn't try and micro-manage the economy with all these silly/petty rules. They are just courting ridicule. They should focus on more important things if they wish to avoid being shamed in the tabloid press and gain the respect of the electorate.

  • rate this
    +2

    Comment number 678.

    Oh lord the pasty tax! It was silly and I'm glad its not going to become law because its a riduclous idea but the fuss that was made! "the people of Cornwall wont be able to eat, as pasties have gone up by around 30p" This government has done FAR worse things than not make pasties marginally more expensive. We should focus on other things not the comparisons between the tax on pasties and caviar

  • rate this
    -1

    Comment number 677.

    "BAmberGas
    I am receiving 1/10th or 10% (if you don't comprehend fractions) of the interest I was receiving"

    So your savings haven't been decimated at all but you're getting a lower interest rate? There are lots of saviings accounts paying 3%+. You're claiming you used to get 30%? Or you're currently a very poor investor. Sounds like you don't understand fractions, percentages or savings

  • rate this
    +2

    Comment number 676.

    I starting to wonder whether this is a diversionary tactic by the government to divert focus from other more pressing and lucrative cuts such as child benefit allowance which affect most families. They have conceeded on the minor revenue earners only .

  • rate this
    +3

    Comment number 675.

    I truly believe these absurb attempts at fleecing the UK public even further are acts of subterfuge to draw people's attention away from other matters! Stealth comes in many forms!

 

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